Dairy Situation and Outlook – April 19, 2012

By April 19, 2012 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin Cooperative Extension
University of Wisconsin-Madison
racropp@wisc.edu

Milk production continues to grow well above a year ago. USDA’s April 19 milk production report showed March milk production for the 23 reporting states up 4.3 percent and an estimated 4.2 percent for the U.S. Milk production at this level continues to be a depressing factor on milk prices. Both more milk cows and above normal increases in milk per cow is to blame for this strong increase in milk production. U.S. milk cows were estimated 0.9 percent higher than a year ago and milk per cow 3.2 percent higher. Milk cow numbers which have increased every month starting back in October of 2010 increased another 12,000 head in March. Slaughter cow prices have been attractive. Nevertheless, cow slaughter through March was just slightly higher than last year. And with more than an ample supply of dairy replacements it is easy to not only maintain cow numbers but to increase them.

Milk production is exceptionally high in all Western states. Compared to a year ago, March production was up 6.6 percent for Arizona, 6.2 percent for California, 7.1 percent for Colorado, 3.3 percent for Idaho, 5.3 percent for New Mexico, 5.7 percent for Texas, 7.8 percent for Utah and 4.5 percent for Washington. Each state added cows and had very good milk production per cow. California, for example had 25,000 more cows than a year ago and milk per cow was up 4.7 percent. These eight Western states added a total of 73,000 cows over a year ago.

In the Northeast, milk production was 0.6 percent lower for Pennsylvania, and the only one of the 23 states with less milk. Pennsylvania had reduced cow numbers by 3,000 head and milk per cow was unchanged. Cow numbers were unchanged for New York and milk production was up 3.1 percent. Ohio had 1,000 more cows and milk production was up 3.4 percent. But, Michigan added 11,000 cows, and with milk per cow up 4.2 percent it had 7.3 percent more milk. (more…)

Dairy Situation and Outlook – March 19, 2012

By March 20, 2012 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
UW-Extension, Cooperative Extension
UW-Madison
racropp@wisc.edu

In March, USDA increased its projected increase in milk production for 2012 from 1.4 percent to 1.8 percent and lowered its projected milk prices. USDA projects an average Class III price in the range of $16.35 to $16.95 compared to $18.33 last year, and the average All Milk price in the range of $17.60 to $18.20 compared to $20.13 last year.

It does appear that milk production will run higher than what was earlier predicted. While strong slaughter cow prices are encouraging increased culling of milk cows a good supply of dairy replacements has prevented a decline in milk cow numbers, and favorable winter weather has improved milk per cow. Cow numbers increased every month last year and continue with increases in January and February. For the 23 reporting states, February cow numbers were 1.2 percent higher than a year ago. Milk per cow, which averaged just 0.9 percent higher last year was 2.7 percent higher in January than a year ago and 3.4 percent higher in February (daily adjusted). Total milk production, which increased 1.8 percent last year was 3.9 percent higher for January and 4.3 percent higher in February (daily adjusted). Milk production growth at this level is depressing for milk prices.

Not only has favorable weather improved milk per cow Western states have experienced an increase in the number of milk cows. Compared to last February, increases in cow numbers were as follows: Arizona 3.8 percent, California 1.6 percent, Colorado 8.1 percent, Idaho 1.2 percent, New Mexico 3.4 percent, Texas 2.6 percent, Utah 5.2 percent and Washington 4.7 percent. In comparison, in the Northeast, except for Michigan which had 2.7 percent more cows, cow numbers were unchanged for New York and 0.4 percent lower for both Pennsylvania and Ohio. In the Upper Midwest, cow numbers were unchanged for Wisconsin, 1.1 percent lower for Minnesota and 1.1 percent lower for Iowa. (more…)

Dairy Situation and Outlook – February 20, 2012

By February 23, 2012 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin-Extension
University of Wisconsin-Madison
racropp@wisc.edu

Milk prices set a record high last year but are projected lower this year. USDA’s latest outlook has the average Class III for 2012 between $17.30 to $18.30 compared to $18.37 last year, and the average All Milk Price between $18.70 and $19.70 compared to $20.14 last year. But, existing futures markets have prices lower than this for the year. Class III futures are below $16 March through May and only peak at $16.55 for October. But, the lower Class III futures prices could very well be an over-reaction to current market conditions. However, dairy product prices continue to decline.

Last year CME butter averaged above $2 per pound from January through August and ended the year at $1.61, and as of February 17 it is $1.415 per pound. Butter production increased 15.4 percent last year and December 31 stocks were 28.9 percent higher. Current butter demand is currently soft. CME cheddar cheese prices are also much lower. Last year, 40-pound cheddar blocks averaged as high as $2.12 per pound in July, were $1.62 in December, $1.55 this January and are now $1.48 per pound. Last year dry whey prices started at $0.41 per pound but strengthened each month ending in December at $0.67. Prices continued to increase in January to $0.70. This increased added strength to the Class III price. Only recently have dry whey prices declined slightly. Dry whey stocks have been tight but with increased cheese production now occurring dry whey production and stocks are likely to increase. As a result, dry whey prices are likely to decline further. (more…)

Dairy Situation and Outlook – January 23, 2012

By January 24, 2012 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin-Extension
University of Wisconsin-Madison
racropp@wisc.edu

Record milk prices were set in 2011. The Class III price averaged $18.37compared to $14.41 in 2010. The Class IV price averaged $19.04 compared to $15.09 in 2010. And the U.S. All Milk price averaged $20.14 compared to $16.26 in 2010. But, while milk prices were a record high so were feed prices which dampened returns over feed costs.

Milk production increased just 1.8 percent to 196.2 billion pounds in 2011 which was positive for prices. But, domestic sales were mixed. Fluid (beverage) milk sales declined about 1.5 percent, the second consecutive year of declines. Both cheese and butter sales showed growth. But, a major factor contributing to record milk prices was dairy exports. The period of January through November compared to a year ago showed exports of nonfat dry milk/skim milk powder up 15 percent, total proteins even, cheese up 33 percent, butterfat up 15 percent and lactose up 14 percent. On a total milk solids basis exports were equivalent to 13.3 percent of U.S. milk production compared to 12.7 percent in 2010.

Forecasts are for lower but yet favorable milk prices in 2012. The level of milk production, domestic sales and exports will determine the final prices. January began with butter, cheese and nonfat dry milk prices all lower than averages for December. The exception has been dry whey prices which continued to show strength. NASS average prices are used to calculate federal order prices. It looks like NASS average prices per pound for January could be near $1.59 for butter, $1.60 for cheese, $1.40 for nonfat dry milk and $0.68 for dry whey. Despite lower cheese prices the strong dry whey price will hold the January Class III above $17 to around $17.05 compared to $18.77 in December. The Class IV price will be close to what it was in December at $16.87. Cheese and butter prices on the CME continue to weaken which will push both February Class III and IV below $17. But, prices could start to strengthen by March or April, peaking out in October or November with prices for the year averaging  $1 to $1.50 per hundredweight lower than 2011. But, this could easily change depending upon the actual level of milk production, domestic sales and exports. (more…)

Dairy Situation and Outlook – December 19, 2011

By December 19, 2011 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin-Extension, Cooperative Extension
University of Wisconsin-Madison
racropp@wisc.edu

USDA’s estimated milk production for the month of November was 1.8% above a year ago, the result of 0.8% more cows and 1.0% more milk per cow. The year could end with total milk production near 196.1 billion pounds, 1.7% more than 2010.

The wholesale price of dairy products often decline seasonally starting the end of November into December, especially for butter and cheese. Milk production is increasing as well as the butterfat and protein composition increasing the yield of butter and cheese per 100 pounds of milk. And by the end of November/early December orders of butter and cheese for the holiday season have been filled. The price of dairy products has fallen from their November monthly average with the exception of dry whey which has held near $0.64 per pound which is favorable for the Class III milk price. But, on the CME cheese prices have fallen. The November 40-pound block price averaged $1.87 per pound, was $1.77 at the start of December and as December 19th it was $1.5625. The CME barrel price averaged $1.90 per pound for November, was $1.71 the start of December and was $1.535 as of December 19th. NASS cheese prices used to calculate the Class III price lag CME prices and with the price of dry whey holding the December Class III price may be near $18.70 compared to $19.07 for November. The average Class III price for the year will be near $18.30 compared to $14.41 for 2010.

Cheese prices may well recover some by mid-January and February but the Class III price for first quarter of 2012 could average near $16.75. Also with lower nonfat dry milk prices dry whey prices will likely show some weakness. Some forecast lower Class III prices, but total cheese stocks have improved with October 31st stocks being 4.3% lower than a year ago. October cheddar cheese production was 5.8% below a year ago and total cheese production just 1.7% higher. Cheese exports continue to be favorable with October exports 22% higher than a year ago and up 31% for the year. (more…)

Dairy Situation and Outlook — November 21, 2011

By November 21, 2011 Categories: Financial Management, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin Cooperative Extension
University of Wisconsin-Madison
racropp@wisc.edu

Higher dairy product prices will result in higher November milk prices than anticipated just a month ago. On the CME, cheddar blocks had hit a low of $1.69 per pound on October 25th, but then started a recovery reaching $2 on November 15th. Cheddar barrels were at a low of $1.69 per pound on October 21st, but then also started a recovery reaching $2.05 on November 15th. Dry whey prices have shown strength since May and have been above $0.60 per pound since early September. The November Class III price will now be higher than the October $18.03 price at near $19. However, weaker butter and nonfat dry milk prices will put the November Class IV price near $18.20, down about $0.20 from the October $18.41 price. CME butter averaged above $2 per pound from January through early September, fell to $1.7575 per pound early October, then strengthened to $1.88 at the end of October but had fallen to $1.6475 per pound as of November 18th. West nonfat dry milk was above $1.60 per pound from May through September before declining and is now $1.47.

The question is whether cheese prices can hold at this higher level. The likely answer is no with different opinions how far prices will fall. Holiday cheese orders are filled and milk production and milk composition are now higher. Factors that support cheese prices are: 1) an improved stock situation. September 30th stocks of American cheese were 1 percent lower than a year ago, and total cheese stocks were 2 percent lower. 2) Cheddar cheese production has been below a year ago since February with September production 3 percent lower and year-to-date production 2.9 percent lower. Total cheese production was below a year ago from July through September with September production 0.6 percent lower and year-to-date production up just 1.6 percent. 3) Cheese exports have been strong. September exports were 22 percent above a year ago with year-to-date exports 32 percent higher. But, CME cheese prices took a down turn on November 18th with 40-pound cheddar declining $0.1525 per pound to $1.8325 and barrels declining $0.125 to $1.87. But, with continued favorable dry whey prices the December Class III price could still end up near $18 putting the average for the year near $18.25 compared to an average of $14.41 last year.

Butter prices could show further weakness with little change in nonfat dry milk prices. The increase in butter production over a year ago has been double digit since March, up 21 percent in September and 16.6 percent year-to-date. While September 30th butter stocks were 16 percent higher than a year ago, stocks were still 22.6 percent below the 5-year average for this date. Butter exports which were running well above a year ago earlier have experienced declines in July (-36 percent), August (-6 percent) and September (-41 percent). Year-to-date exports were still 23 percent higher than a year ago. Nonfat dry milk exports which were running above a year ago fell 11 percent in September but were still 24% higher year-to-date. The December Class IV price could be near $17.50 putting the average for the year near $19.19 compared to an average of $15.09 last year. (more…)

Dairy Situation and Outlook – October 19, 2011

By October 20, 2011 Categories: Financial Management, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin Cooperative Extension
University of Wisconsin-Madison
racropp@wisc.edu

With milk production increasing relatively strong for both August and September and softness in both U.S. dairy sales and dairy exports dairy product prices have weakened which means lower farm milk prices. USDA estimated August milk production 2.1% higher than a year ago with some slow down for September production, up 1.7%. The September increase was due to 1.0% more milk cows than a year ago but just 0.7% more milk per cow. While cheese and butter sales have been favorable fluid milk (beverage milk) sales have been about 1.6% lower than a year ago. Nonfat dry milk/skim milk powder exports for the period of January through July were 36% higher than a year ago, but August exports were up just 1%. For this same period cheese exports were 41% higher than a year ago, but were 10% lower in August. Butter exports which were running well above year ago levels through June, up 57% from a year ago, dropped 36% below a year ago in July and 6% below in August.

On the CME, 40-pound cheddar blocks which were above $2 per pound from early June to mid-August were $1.72 as of October 19th. CME cheddar barrels which were also above $2 per pound from early June to mid-August were also $1.72 per pound as of October 19th. CME butter which was over $2 per pound from early January through early September was $1.86 as of October 19th. West nonfat dry milk was running above $1.60 per pound from May to the end of July and is now trading in the $1.42 to $1.495 range. Dry whey prices have been the exception. With continued strong exports West dry whey continue to trade in the $0.61 to $0.6375 per pound range adding support to Class III prices.

Class III milk set new record highs for July and August at $21.39 and $21.67 respectively. The Class III price declined to $19.07 for September and will be near $17.90 for October. Class IV milk was $20.33 for July, $21.14 for August, $19.53 for September and will be near $18.30 for October.

Farm milk prices for the remainder of the year and into 2012 will be impacted by the level of milk production. The relatively strong increases in milk production continue to be driven by increases in the West and Southwest. Compared to a year ago, September milk production was up 4.7% for Arizona, 0.6% for California, 6.3% for Colorado, 2.9% for Idaho, 4.4% for New Mexico, 10.1% for Texas and 1.8% for Washington. California’s increased milk production was considerably lower than its August increase of 2.9%, the result of 1.4% more cows but 0.8% less milk per cow. In the Upper Midwest, milk production was down 0.7% for Minnesota and just 1.8% and 1.5% higher respectively for Wisconsin and Iowa. In the Northeast, milk production was up slightly in New York, 0.1% and down 1.5% for Pennsylvania. In the Southeast, Florida’s production was up 11.3%.

Class III futures are well below $17 for the first half of 2012 with some improvement after that but still below $17 for the last half of 2012 through September of 2013. Hopefully prices will turn out better than this. On the positive side for higher prices is cheese production. Cheddar cheese production for the month of August was 2.4% lower than a year ago and for the year-to-date 2.9% lower. Total cheese production was below a year ago for both July and August and up just 1.9% year-to-date. August 31st American cheese stocks were just 1.3% higher than a year ago and total cheese stocks even with a year ago. If cheese sales can continue to show some growth, along with anticipated favorable dry whey prices this would add support to Class III prices.

A growth in milk production well under 2% would help to support higher milk prices. USDA estimates milk production to end up 1.6% higher for 2011 with another 1.3% increase in 2012. If Class III prices do drop well below $17 this winter, with high feed prices increased herd culling, less herd expansions and increased exiting of dairy producers can be anticipated. This would slow increases in milk production and support higher milk prices. The increase in cow numbers, which increased month-to-month beginning October of last year through August of this year may have already stopped. The estimated 9.209 million head for September was the same as August. High feed prices will also dampen increases in milk per cow. Unless dairy exports decline significantly, and this is not anticipated, there is a good probability milk prices could strengthen and be higher than what Class III futures are now showing by the second and third quarters of 2012. But, the $20 Class III prices experienced this year are not likely in 2012.

Dairy Situation and Outlook – September 19, 2011

By September 19, 2011 Categories: Current Conditions, Future Outlook, Report/Paper Comments Off

Bob Cropp, Professor Emeritus
University of Wisconsin Cooperative Extension
University of Wisconsin-Madison
racropp@wisc.edu

Milk prices are showing some weakness from record levels set in August but remain well above year ago levels. The August Class III was a record $21.67, will decline to around $18.95 for September compared to $16.26 a year ago. The August Class IV price was $20.14, will decline to around $19.65 for September compared to $16.76 a year ago.

Weakening cheese prices partially offset by continued strong dry whey prices explain the September decline in the Class III price. On the CME 40-pound cheddar blocks averaged $1.9725 per pound in August, started September at $1.79 and have since declined to $1.74. Cheddar barrels averaged $1.9571 per pound in August, started September at $1.735 and have since declined to $1.6775. West coast dry whey averaged $0.5921 per pound in August and is now trading in the range of $0.60 to $0.6275.

Cheese prices could weaken some more but no price collapse is anticipated. While July 31st stocks of both American cheese and total cheese stood at 1.4% higher than a year ago, they were not burdensome. And the fact that cheddar cheese production for July was down 5.4% from a year ago with total cheese production down 2.0% will add support to cheese prices. Cheese buyers will begin to assess their inventories and purchase decisions to fulfill their anticipated upcoming holiday sales. So cheese prices could rally back some. As of now an average cheddar cheese price of $1.75 per pound or higher could hold to year’s end and keeping the Class III price between $17.80 to $18.30 for the last quarter of the year.

CME butter averaged $2.0882 per pound in August, fell below $2.00 on September 6th and has since declined to $1.8750. Butter production is running well above a year ago with July production up 21.6%. But, butter sales continue to be favorable, and as a result, July 31st butter stocks were still 3.0% below a year ago and 23.9% below the 5-year average for this date. Butter prices could rally back to the $1.90 per pound level as we approach the holiday season. Nonfat dry milk prices have weakened some but West coast nonfat dry milk is still trading in the $1.42 to $1.56 per pound range. With some weakness in world prices and U.S. exports down some on a volume basis further decline in nonfat dry milk prices are likely. But, still the Class IV price could stay in the $18 to $18.75 range for the last quarter of the year.

Fluid milk sales (beverage use) continues to be sluggish meaning more milk is available for cheese and other manufactured dairy product production. Fluid milk sales for the January through July period were down 1.4% from a year ago.

USDA’s released report for August milk production was somewhat surprising and not bullish for milk prices. USDA estimated August milk production for the U.S. to be up 2.1% from a year ago compared to just a 0.4% increase in July and the highest relative increase since the 2.1% increase last March. Milk cow numbers which began to increase from one month to the next back last October increased another 2,000 head in August. August cow numbers were 1.1% higher than a year ago and milk per cow was 1.1% higher resulting in the 2.1% increase in total milk production.

This increase in milk production continues to be lead by Western states. Compared to August a year ago, Western states experienced the following increases: Arizona 6.3%, California 2.9%, Colorado 6.2%, Idaho 3.9%, New Mexico 4.9%, Oregon 3.8%, Texas 11.1%, Utah 2.6% and Washington 6.7%. With hurricane Irene followed by tropical storms milk production was expected to be down in Northeast states. Production was down 0.5% in New York and 2.1% in Pennsylvania. Production was also down 2.8% in Ohio and 1.4% in Virginia. Another contributing factor for a greater increase in August milk production was some recovery from hot and humid July weather experienced in the Midwest that depressed milk per cow. Compared to a year ago July milk per cow and August milk per cow was as follows: Iowa -2.3% and +3.5%, Minnesota -8.4% and -4.7%, and Wisconsin -4.2% and +1.1%. With cow numbers holding the same in these states the change in total milk production compared to a year ago for the months of July and August improved from a -6.5% to just a -0.6% for Iowa, a -8.1% to a -4.5% for Minnesota, and a -4.1% to a +1.2% for Wisconsin.

The rate of growth in milk production for the remainder of 2011 and the winter of 2012 is not likely to increase but ought to slow. If the rate of increase in milk production does not fall back to less than 2%, the cheese, butter, nonfat dry milk prices and resulting Class III and Class IV prices shown above could be a little optimistic. Very high feed prices along with these likely lower milk prices ought to encourage heavier culling of dairy herds and less grain and concentrate being fed which would dampen increases in milk per cow. Alfalfa hay prices are up substantially for Western states. Compared to a year ago August alfalfa hay prices were up 97% for California, 83% for Arizona, 104% for Idaho, 66% for New Mexico and 37% for Texas with prices averaging 62% higher for the U.S. Corn prices are averaging about 81% higher than a year ago and soybean prices 28% higher. Dairy cow slaughter thus far this year is 4.6% higher than a year ago and is likely to increase. But, milk prices may still average lower the last quarter of this year and into 2012 due to a sluggish economy holding back any strong increase in domestic milk and dairy product sales. With anticipated increases in New Zealand and Australia milk production as well as the EU countries anticipated U.S. dairy exports, while still favorable are likely to fall below year ago levels. U.S. butter exports have already shown decreases. Butterfat exports for July were down 36% from a year ago. But July exports of other dairy products remained well above a year ago with increases of 22% for nonfat dry milk/skim milk powder, 23% for total whey proteins, 4% for cheese and 10% for lactose. On a total milk solids equivalent basis U.S. exports for January through July accounted for 13.1% of U.S. milk production compared to 11.9% a year ago.

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